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Hamilton’s airport may get a boost if low-cost airline gets off the ground

Passengers arrive on a charter flight from Orlando, Florida at the John C. Munro International Airport in Hamilton, Ontario on Tuesday, April 21, 2015.
(Photo by Peter Power for The Toronto Star) (Peter Power / for The Toronto Star)

MOUNT HOPE, ONT. — Travellers don’t see the usual airport rigmarole of long check-in and security lines at Hamilton’s airport.

The passenger terminal is small, in comparison to Toronto’s Pearson airport or the island airport, with just six gates and two baggage carousels. Parking is only steps away, and the check-in counters are right at the entrance.

But service is limited.

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When WestJet Airlines ran many different routes from Hamilton’s John C. Munro airport, just 85 kilometres from downtown Toronto, annual traffic at its peak exceeded 1.3 million passengers.

WestJet has since decided to centre its operations at Pearson airport, though the airline still operates two flights a day from Hamilton to Calgary, and twice-weekly to Orlando in the winter, and will beef up offerings for the peak summer travel season.

Last year, Hamilton’s passenger traffic dwindled to 330,000 — which included those flying WestJet as well as sun seekers flying on charter flights down south operated by Air Transat or Sunwing Airlines.

But things might soon be looking up for Hamilton’s airport, if efforts to launch new ultra-low-cost carriers get off the ground.

Three different Canadian companies are trying to start airlines, modeled after super no-frills carriers like Allegiant Air or Spirit Airlines in the United States or Ryanair and Easyjet in Europe — among the world’s most profitable airlines.

Passengers might get a low fare, but if they want any extras, they’ll have to open their wallets, from carry-on baggage to food and beverages, even water.

Frank Scremin, president and CEO of the Hamilton airport, says it has had discussions with all three potential carriers — Jetlines, NewLeaf Travel and Enerjet, which says its Jet Naked name is merely a placeholder.

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And if any of those carriers wanted to fly out of Hamilton, the airport is ready and able.

Scremin argues that the Hamilton airport could be an attractive base for an ultra-low-cost carrier, given that 2 million people live within an hour’s drive.

“We view it as having all the fundamentals of a secondary airport, serving the Greater Toronto Area and the Golden Horseshoe,” he said. “If the product is offered, the market will respond.”

He points to the passengers who flocked to the airport when WestJet first started its eastern base there. As well, in 2007, when UK discount carrier Flyglobespan offer cheap flights across the Atlantic, passengers would come from as far away as Windsor and Ottawa.

“We know the market is here. We know it will respond with the right carrier product,” Scremin said, noting that Toronto’s island airport has managed to grow substantially with Porter Airlines. “A strategic carrier can do that for an airport.”

Air Canada, whose regional carrier Jazz used to fly from Hamilton to Ottawa and Montreal, ended its operations here in 2008. Its leisure carrier Rouge was slated to begin a daily flight between Hamilton and Calgary in June.

But Air Canada has delayed that route, after last month’s crash at the Halifax airport, leaving the carrier short of an aircraft.

Citing fleet constraint, Air Canada spokesman Peter Fitzpatrick said it will launch the new service in May 2016 instead.

The Hamilton airport is operated by Tradeport, a division of private company Vantage Airport Group, under a 40-year lease from the city of Hamilton, which owns the lands.

One of the selling points is Hamilton has no restriction on slots – the number of takeoffs and landings a day – and there is no curfew, so planes can depart early in the morning or land late at night.

While the airport handles more cargo flights – including for UPS, DHL and Purolator, more revenues come from passenger business, between landing and terminal fees.

Robert Kokonis, president of AirTrav Inc., an airline consultancy, believes if an ultra-low-cost carrier manages to launch, Hamilton would be an ideal spot, given its geographic location.

“It’s a no brainer,” Kokonis said. “Why drive from Richmond Hill to Buffalo or Mississauga to Buffalo?”

He added that ultra-low-cost carriers can be massively profitable, but warns he’s not sure the Canadian marketplace can sustain more than one.

“Whoever launches first, takes a key portion of the marketplace,” Kokonis said, adding they are not necessarily competing with big carriers, but looking for travellers who aren’t flying or are choosing to drive instead.

Another question is whether these ultra-cheap carriers can compete with U.S. carriers, which face lower operating costs at airports, where governments subsidize costs.

Pascal Cohen, senior manager of marketing at the Buffalo Niagara International Airport, concedes there may be opportunities to drive down domestic Canadian fares at secondary airports like Hamilton, but argues it wouldn’t necessarily apply on flights to the United States.

Cohen said built-in taxes and fees in Canada will drive ticket prices far higher than for rival U.S. carriers at border airports.

“Any passengers looking for low fares to Florida, Las Vegas would not stop their car at Hamilton, but select the maximum savings across the border,” he said.

No-frills newcomers

The Canadian tarmac might be littered with failed airlines from Jetsgo to Canada 3000, but new no-frills airlines are all jockeying to launch.

It’s a model that’s been perfected by companies like Ryanair and easyJet in Europe, and Spirit Airlines and Allegiant Air in the United States.

Passengers might gripe about the service, tight seating and getting “nickeled and dimed” for everything from bringing on carry-on bags to a bottle of water, but they keep coming back for the deals.

Here’s a look at three airlines hoping to get off the ground in Canada:

Canada Jetlines

Flight Plan: Plans to do an initial public offering this fall, with launch to occur six months after raising financial goal of $50 million, starting with two leased planes, followed by eight planes by month 14, and 16 planes by month 30.

Initially, Jetlines plans to start its operations in Vancouver, then move eastward to bases in Winnipeg and Hamilton – with a focus on being an ultra-low-cost carrier.

The Vancouver-based company had originally announced plans to do an IPO through a reverse takeover of Innovent Capital, but that deal has since fallen apart.

“It’s going to be a competitive landscape out there,” said Jetlines president David Solloway. “You need to have good cash reserves to ensure you will be successful.”

“This business model is very different,” he said. “You build the airlines that Canadians want to fly, not the airlines of your dreams.”

He noted that previously failed airlines tried to compete head-on with Air Canada and WestJet, on big city pairs – such as Toronto to Vancouver, or Toronto to Calgary.

“We’ll stay largely out of the way of the majors,” he said. “We will serve secondary airports.”

The key is finding uncongested regional airports like Hamilton, where fees are lower and airplanes can land quickly, and be turned around to take off again.

“At the end of the day, the more time the airplane spends in the air, the more profit you can get out of each individual aircraft,” Solloway said.

Jetlines will offer a la carte service, where people pay for what they want, whether it’s a carry-on bag or cup of coffee. Despite the ultra-low moniker, Solloway promises the service will be great, and the quality of food and beverage will be good.

“People are paying for it,” he said. “Because of our population base, we have to be gentle. We need repeat customers. We can’t burn our customers.”

The airline will even have an extra flight attendant on board. That’s because the flight attendant, who will earn a commission, can sell extras to the passengers including other merchandise. Solloway noted that the top selling item on flights from U.S. border airports is cellphone SIM cards.

He estimates that fares could be 40 per cent less than typical fares. And Jetlines will charge $20 for a checked bag and $25 for a carry-on bag to discourage passengers from bringing too much cabin luggage, which slows the boarding and deplaning process.

NewLeaf Travel Co.

Flight Plan: Hopes to launch this summer with Kelowna’s Flair Airlines planes and flight crews. It is modelled after Allegiant Air, which offers flights and accommodations and associated travel.

Jim Young, president and CEO, says NewLeaf Travel will be much more than just an airline, selling everything from hotel rooms to bus tours and museum passes.

“We’re funded and ready to move forward,” said Young, who worked briefly for Jetlines. “Our simple mantra is ‘We will get there, on time with your underwear. We will offer you a place to stay and we will give you something to do while you are there.’ “

Aimed only at leisure customers, it wants to tailor options to customers including selling everything a traveler could want.

“Some customers just want a seat and seat belt. They want to get between A and B because they are going to visit their grandmother,” he said.

NewLeaf tested the waters over March break, running two successive charter flights between Hamilton and Kelowna, and offering ski packages with three resorts in the Okanagan Valley.

“We know there’s a market,” he said. “We used the opportunity to see how we all worked together, the Okanagan destinations, Flair Airlines, the aircraft operator partner.”

The key is operating simply, point-to-point flights, with little infrastructure and outsourcing work such as ground handling, he said

“Timing is everything in the airline business. You have to be at the right time in the cycle, with oil prices, with the marketplace and the economy,” he said. “We think all of that is coming together for Canada right now.”

Enerjet

Flight Plan: Airline with three planes flies workers to Alberta’s oil patch on weekdays, and weekend flying for Transat to Mexico. It has said it would operate ultra-low-cost carrier as Jet Naked, though that name is just a place marker.

Enerjet president Tim Morgan, who is one of the original co-founders of WestJet Airlines, has been out looking for capital, though he won’t say how much he needs to launch.

“You need a pretty good-sized chunk,” he said. “Our business model is to operate across the country.”

Although Jet Naked has been bandied about as a name, Morgan says that won’t be the final name. “It might be a little too much for the Canadian market,” he said.

Morgan is reticent to disclose too much about the business plan, but he says it won’t be a WestJet 2.

“We won’t compete with WestJet or Air Canada,” Morgan said, noting fares must be substantially lower. “We have to do something that’s different. That’s not in the country right now, not being offered to Canadians.”

With jet fuel prices low, he believes it’s not a bad time for airlines. He noted that ultra-low-cost carriers are successful in good and bad economic times, because their market is almost all new traffic, people who don’t fly right now.

“Is it a good time? I suppose. It’s certainly not a bad time,” he said. “It will launch when we are ready to go.”

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